-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EvmM8gz75zz6OyKVi8LlJwgrLI6nHSygvMH6B4EitrVTMZmv3qJ6eQQuZ3ixhaQ/ SoL1oqQQnAdcLIDFA+CTrQ== 0000901118-97-000004.txt : 19970328 0000901118-97-000004.hdr.sgml : 19970328 ACCESSION NUMBER: 0000901118-97-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMADONNA RESORTS INC CENTRAL INDEX KEY: 0000901118 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880297563 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21732 FILM NUMBER: 97564959 BUSINESS ADDRESS: STREET 1: PO BOX 95997 CITY: LAS VEGAS STATE: NV ZIP: 89193-5997 BUSINESS PHONE: 7023821212 MAIL ADDRESS: STREET 1: PO BOX 956997 CITY: LAS VEGAS STATE: NV ZIP: 89193-5997 10-K 1 FORM 10 - K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the Fiscal Year Ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from ............... to ............... Commission File Number 0-21732 PRIMADONNA RESORTS, INC. (Exact name of registrant as specified in its charter) Nevada 88-0297563 (State of Incorporation) (I.R.S. Employer Identification No.) P.O. Box 95997, Las Vegas, Nevada 89193-5997 (Address of principal executive offices) Registrant's telephone number, including area code: (702) 382-1212 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ___________________ _____________________ Not applicable Not applicable Securities registered pursuant to Section 12(g) of the Act: Common Stock, $ .01 par value ___________________________________________________________ (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 17, 1997: $377,712,477 The number of shares outstanding of each of the registrant's classes of common stock, as of March 17, 1997: 29,822,475 shares of Common Stock, $ .01 Par Value Part III incorporates information by reference from the Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Registrant's fiscal year. Exhibit Index on page 66 Total number of pages 69 1 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES FORM 10-K INDEX Page no. PART I Item 1. Business................................................ 3 - 14 Item 2. Properties.............................................. 15 Item 3. Legal Proceedings....................................... 15 - 16 Item 4. Submission of Matters to a Vote of Security Holders..... 17 Part II Item 5. Market for Registrant's Common Stock and Related Stockholders Matters................................. 17 Item 6. Selected Financial Data................................. 18 - 19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 19 - 25 Item 8. Consolidated Financial Statements and Supplementary Data................................... 26 - 59 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.................. 60 Part III Item 10. Directors and Executive Officers of the Registrant...... 60 Item 11. Executive Compensation.................................. 60 Item 12. Security Ownership of Certain Beneficial Owners and Management....................................... 60 Item 13. Certain Relationships and Related Transactions.......... 60 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................................... 61 - 64 Signatures.............................................. 65 2 PART I Item 1. Business Primadonna Resorts, Inc. ("Company") owns and operates three resort-casinos on both sides of Interstate 15 at the California/Nevada border, newly designated as Primm, Nevada ("Primm"), a 50% interest in NEW YORK-NEW YORK Hotel & Casino, LLC ("NEW YORK-NEW YORK") on the Las Vegas "Strip", and the Primm Valley Golf Club ("Primm Valley") in California. Buffalo Bill's Resort & Casino ("Buffalo Bill's"), Primadonna Resort & Casino ("Primadonna"), and Whiskey Pete's Hotel & Casino ("Whiskey Pete's" and together with Buffalo Bill's and Primadonna, "Primm Properties") form a major destination location and offer, to the more than ten million vehicles traveling through Primm on Interstate 15, the first opportunity to wager upon entering Nevada, and the last opportunity before leaving. The Company estimates that more than 25% of all passing vehicles stopped at the Primm Properties in 1996. The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in NEW YORK-NEW YORK, which was completed in late December 1996, and opened to the public on January 3, 1997. The New York themed mega-resort is located at the premier location on the Las Vegas "Strip", the corner of Tropicana Avenue and Las Vegas Boulevard. In February 1997, the Company opened the challenging championship 18-hole Primm Valley Golf Club, designed by Tom Fazio, and located in California, four miles south of Primm. This represents the first phase of a golf educational complex to include an additional 18-hole championship course and a golf academy. Business Strategy The Company's business strategy at Primm is to capitalize on its unique and advantageous location on the heavily traveled Interstate 15 corridor. Approximately 10.8 million, 10.6 million and 10.4 million vehicles traveled through Primm on Interstate 15 in 1996, 1995, and 1994, respectively. The next closest casino-hotel is located in Jean, Nevada, approximately eleven miles north towards Las Vegas. Most of the land between Primm and Jean that is not owned, leased or subject to the Company's exclusive gaming rights, is owned by the Federal Government. The Primm Properties offer a convenient stop for Interstate 15 travelers, and an attractive destination location for Southern California residents, and to a lesser extent, visitors from Las Vegas and elsewhere. The Company positions its Primm Properties to appeal to "tiered" market segments including the family/entertainment-oriented Buffalo Bill's, the conference/leisure-oriented Primadonna, and the value-oriented Whiskey Pete's. These hotel-casinos attract drive-by and overnight customers offering good values on dining and lodging, with an emphasis on service, quality, cleanliness and comfort. The Primm Properties offer an array of amenities and attractions, including 113,500 square feet of casino space, 2,676 hotel rooms, 10 restaurants, and a variety of rides. The three casinos include approximately 3 4,150 slot machines, 105 table games, poker, keno, and race and sports books. In addition, the Primm Properties offer one-of-a-kind swimming pools, a movie theater, motion simulation theaters, ferris wheel, bowling center, an interactive water flume ride, and "The Desperado" roller coaster. These attractions encourage visits by families and provide entertainment for children, while allowing adults to spend more time in the Company's casinos. The 6,100-seat Star of the Desert Arena hosts top-name entertainers, and has allowed the Company to use special events as part of extended stay packages. To further advance Primm as a destination location, increase mid-week utilization, and attract a more upscale clientele, the Company opened Primm Valley in February 1997. A second 18-hole course and a golf school is under construction with opening expected by the end of 1997. Additionally, the Company is constructing a 25,000 square foot conference center at the Primadonna that is expected to open in mid-1997. The Company intends to pursue group and conference business to coincide with the opening of the conference center. In addition, a 600,000 square foot themed outlet mall is to be constructed adjacent to the Primadonna, by third party developers; the anticipated opening is mid-1998. The Company is actively continuing bus and tour contracts with major operators. Special events and entertainment promotions are held to further enhance the destination concept as well as to foster repeat visits from patrons. A major element of the Company's business strategy at Primm is to emphasize slot machine play. Slot play contributes to a consistent cash flow, profit generation, and provides significant operating leverage because of lower associated labor costs. The Company's low minimum and maximum ($500) betting limits for its table games also helps stabilize its cash flows. The Company has installed player tracking systems to encourage customer loyalty, and visitations. Additionally, the Company uses these systems to more efficiently target and administer its direct mail programs. The Company's strategy at NEW YORK-NEW YORK is to create an atmosphere that will cause visitors to believe that the hotel, with its New York skyline, the "Manhattan Express" roller coaster and its Coney Island style amusement center, are a "must-see" on any Las Vegas visit. NEW-YORK-NEW YORK is targeted towards the upper end of the middle market. The Company's growth and diversification strategy is to develop or acquire additional casino operations by capitalizing upon its design, development, marketing, and operational expertise. The Company is actively seeking opportunities to expand beyond Primm and NEW YORK-NEW YORK, however, the Company is highly selective in its evaluation of expansion opportunities. The Company's expansion activities focus on (i) venues with long-term growth potential, political stability, and a reliable regulatory environment, (ii) unique locations that provide immediate access to high population density or traffic flow and some degree of market protection, (iii) development sites with enough available land to grow, and (iv) projects that generate meaningful cash flow and an above average return on investment. The Company believes that it is well positioned to pursue business opportunities either alone, or through strategic alliances with other entities. 4 Current Operations Buffalo Bill's Resort & Casino Buffalo Bill's is a western-themed resort-casino, targeted towards the family/ entertainment market segment, offering diverse amenities that appeal to all age groups. The 35 foot high ceiling gives one the feel of the wide open spaces of the old west. Buffalo Bill's has 1,239 rooms in two 16-story towers. The complex includes approximately 46,000 square feet of casino space including approximately 1,700 slot machines, 42 table games, a keno lounge, and a race and sports book; four restaurants; a deli; two bars; two motion simulation theaters; a movie theater; the 6,100-seat Star of the Desert Arena; a Ghost Town attraction including various novelty, gift, and food specialty shops; a buffalo shaped swimming pool with a Jacuzzi; a video arcade and midway games. In addition, Buffalo Bill's features "The Desperado", the tallest and fastest roller coaster in the western hemisphere, and the interactive "Adventure Canyon" water log flume ride, both of which are accessible from within the casino. In April 1997 the Company is opening another thrill ride , the "Turbo Drop", which gives riders the experience of weightlessness from 6Gs of negative force. Whiskey Pete's Hotel & Casino Whiskey Pete's attracts travelers seeking a value-oriented casual and friendly atmosphere. The congenial, "down to earth" atmosphere is promoted through the Gold Rush period dress of the employees, the use of wood and bright colors throughout the interior, and the "home-style" cooking offered in the Whiskey Pete's restaurants. Whiskey Pete's, an 1850's Gold Rush themed hotel-casino, offers a 36,400 square foot casino, three restaurants, a snack bar, three bars and a lounge, a 650 seat showroom, 777 rooms, swimming pool with a water slide and Jacuzzi, and an arcade. The casino includes approximately 1,350 slot machines, 30 table games, a keno lounge, and a race and sports book. The casino entrance features the original Bonnie & Clyde "Death Car" and the Dutch Schultz-Al Capone "Gangster Car". Primadonna Resort & Casino The Primadonna Resort & Casino is currently being re-themed to a golf resort atmosphere, and will soon be renamed Primm Valley Resort & Casino. The rooms renovation has been completed, and the balance of the project should be finished by mid-1997. The project also includes the construction of a 25,000 square foot conference center, capable of accommodating 2,500 people, and the addition of 15,000 square feet of casino space. During construction of the expansion, the Company may experience an impact on business levels as areas of the casino are taken out of service for remodeling work. The Primadonna is targeted to the upscale conference/leisure market. The property is located between Whiskey Pete's and Buffalo Bill's, and the current monorail system is being upgraded and extended to connect all three properties. Primadonna currently has a 31,100 square foot casino, including 1,100 slot machines and 33 table games, keno lounge, poker and a race and sports book, 660 rooms, three restaurants, two bars, a snack bar, ferris wheel, arcade, and 5 bowling center. The property is a four-story diamond shaped building with a large interior courtyard consisting of a swimming pool, Jacuzzi and garden. Primm Valley Golf Club The Primm Valley Golf Club, located approximately four miles south in California, was completed in December 1996 and opened to the public in February 1997. The first phase offers an 18-hole Tom Fazio designed championship course, a driving range, and other practice facilities. The second phase, currently under construction, includes a clubhouse, to be completed in mid-1997, and a second Tom Fazio designed 18-hole course, to be completed by the end of 1997. The addition of the golf course, coupled with the Primadonna re-theming and the conference center, is expected to appeal to groups seeking an attractive setting for mid-week conferences, with golf as a recreational option. The Company also believes that the attractiveness of Primm Valley is enhanced by the limited number of premier golf facilities available to Las Vegas visitors and residents. NEW YORK - NEW YORK The 48 story NEW YORK-NEW YORK Hotel & Casino complex includes such landmarks as the Statue of Liberty, Empire State Building, Central Park, and the Brooklyn Bridge. This New York-themed property contains an 84,000 square foot casino, 2,033 rooms, themed restaurants and lounges, retail outlets, the "Manhattan Express" roller coaster and a Coney Island style amusement area. The casino has approximately 2,400 slots machines, 71 table games, a keno lounge, and a race and sports book. The property includes approximately 30,000 square feet of retail space, and will be opening a showroom in mid-1997. The operating agreement for NEW YORK-NEW YORK contains a buy/sell provision allowing either party, at any time six months after opening, to make an offer for a stated price, for the other party's interest. The other party must either sell its interest, or buy the offering party's interest, at the stated price. NEW YORK-NEW YORK is managed by a chief executive officer appointed by the board of directors consisting of three representatives from each company. If the Company and MGM are unable to reach agreement on any joint venture decision, there is no mechanism for resolving the dispute other than through the buy/sell provision. Amenities The Company offers numerous other amenities at Primm. Interstate 15 travelers have 24-hour Unocal and Texaco service stations as well as a truck stop at Whiskey Pete's that offers a lounge and shower facilities. Located adjacent to Primadonna is the RV Village offering 199 full-service hookups for recreational vehicles. Subleased to a franchisee is a 24-hour McDonald's. The Primm Properties also benefit from a convenience store (owned by the Company's Chairman of the Board and his brothers and sisters), located just south of Primadonna on the California side of the border. This store attracts Las Vegas residents who want to purchase California lottery tickets. 6 Other Projects Retail Outlet Mall The team of Sheldon Gordon and Randy Brant, developers of the Forum Shops at Caesar's Palace, along with the TrizecHahn Centers, intend to develop up to a 1.0 million square foot highly themed retail outlet mall on 100 acres of land adjacent to the Primadonna and owned by Primm South Real Estate Company. The first phase of the project is approximately 600,000 square feet and is expected to be completed by the middle of 1998. The Company may incur approximately $1.5 million of infrastructure costs related to roadways and water/sewer systems to accommodate the development, which will be built and financed by the developers. The Company is planning to directly connect the Primadonna casino to the mall. Southwest The Company has advanced a total of $3.8 million to Southwest Casino and Hotel Corp. ("Southwest"), a developer and manager of Native American gaming enterprises. Southwest manages a Class II Indian gaming facility in Eagle Pass, Texas for the Kickapoo Traditional Tribe of Texas. Among other games, the Kickapoo facility operates Lucky Tab 2 machines which are currently the subject of litigation in Texas concerning their use in a Class II facility. An adverse ruling would impact the profitability of this operation. Southwest also manages a Class II Indian gaming facility just outside Oklahoma City, Oklahoma for the Cheyenne and Arapaho Tribes. The Company holds a $1.6 million Convertible Term Promissory Note which is convertible into preferred stock of Southwest, and a $2.2 million Demand Promissory Note which is secured by the management contract on the Kickapoo gaming facility, a deed of trust, and a UCC-1 financing statement. Based upon the current financial condition of Southwest, the Company has fully reserved the $1.6 million Convertible Term Promissory Note and related interest. No reserve has been established for the Demand Promissory Note due to its collateralization. Additionally, the Company has issued an $800,000 reducing letter of credit related to the Texas facility, which has been reduced to $515,000 as of February 28, 1997. Competition The Company's Primm Properties compete primarily with two casino-hotels located 11 miles north along Interstate 15 in Jean, Nevada, and with numerous other casino-hotels in the Las Vegas area, principally on the basis of location, range and pricing of amenities, gaming mix, and overall atmosphere. The NEW YORK-NEW YORK Hotel & Casino competes primarily with the other mega- resorts and hotels on Las Vegas Boulevard, and with a few major casino-hotels in downtown Las Vegas. Several new major resort projects have been announced and are expected to be completed within the next two years. Several current resorts have announced plans to add additional rooms in Las Vegas. This increase in capacity may increase competition for customers both at the Company's Primm Properties and at NEW YORK-NEW YORK. Since many of the Company's current customers stop at Primm as they are driving on Interstate 15 to and from major casino-hotels 7 located in Las Vegas, the Company believes that its success at Primm is also favorably influenced by the popularity of the Las Vegas casino-hotels. To a lesser extent, the Company's Primm resort-casinos also compete with gaming establishments in or near Laughlin, Nevada, approximately 90 miles away in Southern Nevada. Laughlin caters to moderate to middle income, value oriented customers who travel primarily by car, bus, and recreational vehicle. The addition of major gaming properties or the substantial expansion of existing Laughlin casino-hotels could have an adverse effect on the number of customers visiting the Company's Primm Properties. Since the 1980's, legalized gaming opportunities have proliferated throughout the United States. Some form of gaming is legal in all 50 states except Hawaii and Utah. Riverboat, dockside or land-based gaming is currently legal in several states, and in excess of 100 compacts have been negotiated between Indian tribes and certain states to allow various forms of gaming on Indian owned land. California sponsors a lottery (as do numerous other states) and allows other non-casino style gaming, including pari-mutuel wagering, card parlors and bingo. There are currently Indian casinos in California and Arizona , several of which are quite large and offer slot machines and table games. Indian casinos located along Interstate 10 in the San Bernadino-Palm Springs region and in the greater San Diego area pose the most direct competition to the Primm Properties. Despite the fact that compacts have not been negotiated between the Tribes and the State of California, these Indian casinos have operated with casino-type gaming. There are various cases making their way through the California court system that are intended to force the State to negotiate full scale gaming compacts with the Indian tribes. Additionally, there are state and local initiatives as well as legislation continually being presented to allow some form of Indian and non-Indian casino gaming at various locales in California. While the Company believes that the continued spread of legalized gaming may, in the future, present the Company with additional opportunities for expansion, increased legalized gaming in some jurisdictions, particularly in areas close to Nevada, such as Southern California and Arizona, could adversely affect the Company's operations, particularly the number of bus groups and individuals making day trips to the Company's properties. Business Risks The Company is highly dependent on customers from Southern California traveling to and from Las Vegas along Interstate 15. In the event that the Interstate, or the entrance and exit ramps providing access to the Primm Properties, were impaired for an extended period of time due to road modifications, repairs, weather, or other factors, the operations and financial performance of the Company would be adversely affected. Additionally, significant increases in fuel costs could have an impact on the number of travelers on Interstate 15. 8 As with any major construction project, the expansion and remodeling of the Primadonna, the construction of a club house and second golf course at Primm Valley, and the plans for an outlet mall, involve many potential risks, including shortages of materials and labor, work stoppages, labor disputes, weather interference, engineering, environmental, or geological problems, governmental regulations and approvals, and unanticipated cost increases, including those arising from design changes, any of which could give rise to delays or cost overruns. The Company's employees primarily live in the Las Vegas area, which is approximately 40 miles away from Primm . The continued growth and expansion of resort properties in Las Vegas could adversely impact the Company's ability to attract and retain qualified employees, and may put pressure on compensation costs. While the Company believes that it has sufficient water for its present expansion plans and operations, the Company will need further governmental approvals to use additional water for future expansion. There can be no assurance that future requests for additional water will be granted. Regulation and Licensing The ownership and operation of casino gaming facilities in Nevada are subject to (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, "Nevada Act"); and (ii) various local regulations. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board"), and the Clark County Liquor and Gaming Licensing Board ("CCLGLB"). The Nevada Commission, the Nevada Board and the CCLGLB are collectively referred to as the "Nevada Gaming Authorities". The PRMA Land Development Company, which owns and operates the Primm Valley Golf Club, is subject to licensing and regulatory control of the California and San Bernadino County Alcoholic Beverage Commissions. The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) to provide a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. The Primadonna Corporation, which operates Whiskey Pete's, Primadonna, and Buffalo Bill's, is required to be licensed by the Nevada Gaming Authorities. Additionally, PRMA Las Vegas, Inc., which is a 50% joint venture party in NEW YORK-NEW YORK, as well as NEW YORK_NEW YORK itself, are required to be licensed by the Nevada Gaming Authorities. The gaming license requires the periodic payment of fees and taxes and is not transferable. The Company is registered 9 by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, The Primadonna Corporation, PRMA Las Vegas, Inc., and NEW YORK-NEW YORK have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who are actively and directly involved in gaming activities of The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director, or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability, or of questions pertaining to licensing, are not subject to judicial review in Nevada. The Company, The Primadonna Corporation, PRMA Las Vegas, Inc., and NEW YORK-NEW YORK are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK must be reported to or approved by the Nevada Commission. 10 If it were determined that the Nevada Act was violated by The Primadonna Corporation or NEW YORK-NEW YORK, the gaming licenses they hold could be limited, conditioned, suspended, or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK and the persons involved, could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company's gaming properties and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the Company's gaming properties), could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company's gaming operations. Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined, if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of the Company's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor", as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the Company's voting securities, may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor, and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies or operations of the Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. The applicant is required to pay all costs of investigation. 11 Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation, beyond such period of time as may be prescribed by the Nevada Commission, may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, The Primadonna Corporation, PRMA Las Vegas, Inc., or NEW YORK-NEW YORK, the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting rights conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value. Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. The Nevada Commission may, at its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated, and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting rights by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The Company is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company's stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on the Company. The Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire, or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. On July 25, 1996, the Nevada Commission granted the Company prior approval to make public offerings for a period of one year, subject to certain conditions ("Shelf Approval"). However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. 12 Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities, and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policies to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof, and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purpose of acquiring control of the Registered Corporation. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly, semi-annually, or annually, and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments. Nevada licensees that hold a license as an operator of a slot route, or a manufacturer's or distributor's license, also pay certain fees and taxes to the State of Nevada. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000, to pay the expenses of investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission, if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming 13 operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability. The sale of alcoholic beverages at Primadonna, Whiskey Pete's, Buffalo Bill's, Primm Valley Golf Course, and NEW YORK-NEW YORK is subject to licensing, control, and regulation by the applicable state and local authorities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend, or revoke any such licenses, and any such disciplinary action could (and revocation would) have a material adverse effect upon the operations of the Company. The gaming industry represents a significant source of tax revenues for the State of Nevada and Clark County. From time to time, various changes in the tax laws and their administration are proposed by various legislators and officials. Recent proposals have included a federal gaming tax and increases in state and local gaming taxes. A federal study of gaming has been passed into law. The two year study of gaming by the commission will have broad powers, including subpoenas. The impact of this study is not known at this time. In addition, federal income tax proposals have been suggested which would limit the deductibility of promotional allowances provided to customers, modify the withholding requirements on amounts won by customers, and impose withholding on negotiated discounts provided to customers. It is not possible to determine with certainty the likelihood of possible changes in the tax laws or their administration. Such changes, if adopted, could have a material adverse effect on the Company's financial results. The Company and certain of its officers and directors have been investigated and found suitable by the Mississippi Gaming Commission ("MGC") in connection with a proposed acquisition in Biloxi Mississippi, which acquisition was later abandoned by the Company. The Company is also registered with the MGC as a "publicly traded holding company" and remains subject to the reporting requirements by the Mississippi Gaming Control Act and the regulations promulgated thereunder as such requirements relate to the Company's registration as a publicly traded holding company. Such reporting and registration requirements are similar to those imposed by the State of Nevada discussed above. Employees As of December 31, 1996, the Company had a total of 3,805 employees, of whom 1,214 were in gaming operations, 427 in hotel operations, 1,008 in food and beverage, and 1,156 in other operations. None of the Company's employees is represented by a labor union, but there can be no assurance that this will continue. Management considers its labor relations to be good. As of December 31, 1996, NEW YORK-NEW YORK, in which the Company is a 50% partner, had 1,777 employees. None of these employees are currently represented by labor unions, however, the property is negotiating with the Teamsters and Culinary Unions for representation of certain employees. 14 Item 2. Properties The Primm Properties are located on approximately 142 acres of land on both sides of Interstate 15 at the California/Nevada state line. Substantially all of the land is leased from Primm South Real Estate Company, a corporation owned by the Company's Chairman, and his brothers and sisters. The lease has an expiration date of 2043 with an option to renew for an additional 25 years. Rent for all properties covered by the lease is approximately $441,000 per month. Rent increases each year by the cost of living, but not more than eight percent in any one year. Each eight years, the rent is to be reset by two appraisers, or, if they are unable to agree, by another appraiser selected by the other appraisers. The lease provides for a fee of $100,000 per year, adjusted every 10 years by the cost of living but not more than eight percent annually, for the exclusive right to any gaming activity on any of the unleased acreage owned by the lessor. In addition, the lessor has made available to the Company acreage for a wastewater treatment plant operated by the Company and the associated rapid infiltration basins. The Company owns approximately 12 acres immediately north of Buffalo Bill's that are currently the site of 144 company-owned mobile homes rented to employees. The Company owns approximately 535 acres of land in California, approximately four miles south of Primm, which is the location for the Primm Valley Golf Club. Upon completion of the second golf course, approximately 100 acres will remain for future use. The Company has first priority on water in various wells located on federal land, and has received permits to pipe the water to its property. The Company believes that there is adequate water, and that the Company has the necessary permits to pipe sufficient quantities of water, to meet present and ongoing needs of the Primm Properties. Such permits and rights are subject to the jurisdiction and on-going regulatory authority of the U.S. Bureau of Land Management, the States of Nevada and California, and local governmental units. The Company believes that adequate water for Primm Valley is available. There can be no assurances that any future requests for additional water will be approved, or that no further requirements will be imposed by governmental agencies on the Company's use and delivery of water to the Primm Properties. The wastewater treatment plant has sufficient capacity to support the Primm requirements. The plant was constructed, and will be upgraded, in a manner to allow for expansion on the site if additional capacity is needed in the future. NEW YORK-NEW YORK is located on approximately 20 acres at the intersection of Tropicana and Las Vegas Boulevard on the Las Vegas "Strip". This is subject to a first priority deed of trust secured by the $285 million of bank financing due December 2001. Item 3. Legal Proceedings On April 26, 1994, a purported class action lawsuit was filed in the United States District Court, Middle District of Florida, against 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company ("Poulos"). On May 10, 1994, a complaint alleging substantially identical claims was filed by another plaintiff in the United States District Court, Middle District of Florida, against 48 manufacturers, 15 distributors and casino operators of video poker and electronic slot machines, including the Company and most of the other major hotel-casino companies ("Ahern"). The complaints allege that the defendants have engaged in a course of fraudulent and misleading conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win. The two lawsuits have been consolidated into a single action, and discovery with respect to jurisdictional issues is currently in progress ("Poulos/Ahern"). On December 9, 1994 the Florida Court ordered the case be transferred to the United States District Court for the District of Nevada. On April 17, 1996, the federal district court in Las Vegas, Nevada, dismissed the purported class action suit, and gave the claimants until May 31, 1996 to file amended complaints. On May 31, 1996 the plaintiffs filed an amended complaint, and also filed a motion to substitute Brenda McElmore for Mr. Ahern as one of the class representatives. The motion has not been opposed by the Company. On July 12, 1996, the plaintiffs filed a motion seeking to lift the December 30, 1994 stay of discovery and seeking leave to add additional defendants. The defendants (including the Company) have opposed those motions, and no hearing date has been set on these motions. By order dated August 17, 1996, the Case was transferred to Judge Ezra of the United States District Court of Hawaii, and assigned the new Case No. CV-S-94-1126-DAE(RJJ)-BASE FILE. On September 26, 1995, a complaint was filed in the United States District Court for Nevada against 45 operators, manufacturers and distributors of video poker and electronic slot machines, including the Company ("Schreier"). The complaint alleges that the defendants have engaged in fraudulent conduct to induce persons to play the devices by misrepresenting how the devices operate, and the opportunity to win. The complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act, and common law fraud and seeks unspecified compensatory and punitive damages. On August 15, 1996 the Court granted the motion to dismiss, without prejudice. An amended complaint was filed on September 30, 1996. The defendants (including the Company) have filed motions to dismiss the amended complaint for failure to state a claim and on other grounds. On December 13, 1996 Judge Ezra consolidated the Poulos/Ahern and Schreier cases("Poulos/Ahern/Schreier"). The plaintiffs, Poulos/Ahern/ Schreier had until February 14, 1997 to file one consolidated complaint, which was done. The defendants (including the Company) appointed a steering committee to file consolidated pleadings in response to the consolidated complaint. On February 14, 1997, the parties filed a case management order. The defendants filed a motion to dismiss on March 21, 1997. An amended complaint in a purported class action lawsuit was filed on August 23, 1995 in the United States District Court for New Jersey against 80 named defendants, including the Company and other casino operators. The complaint alleged that the defendants had conspired to deprive skilled blackjack players from having the opportunity to play and win in the casinos. The complaint alleged violation of various statutes, including the Fair Credit Act, the Sherman Act, and several state antitrust and fraud statutes. The complaint sought compensatory and exemplary damages, including treble damages for alleged violations of the Sherman Act. On May 30, 1996, the United States District Court for New Jersey granted the defendants' motion for dismissal, in its entirety. Management does not expect that the above litigation will have a material adverse effect on the Company's financial position or results of operations. 16 Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Part II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters The Company's common stock is quoted on the NASDAQ National Market System under the symbol "PRMA". The following table sets forth, for the periods indicated, the high and low closing sales price per share of the common stock as reported by NASDAQ.
HIGH LOW _____ _____ Fiscal Year Ending December 31, 1996 First Quarter................................... $17.75 $12.25 Second Quarter.................................. 25.00 15.25 Third Quarter................................... 23.75 17.00 Fourth Quarter.................................. 19.50 15.63 Fiscal Year Ending December 31, 1995 First Quarter................................... $25.00 $19.50 Second Quarter.................................. 25.75 20.88 Third Quarter................................... 24.25 15.25 Fourth Quarter.................................. 17.38 14.25
As of February 4, 1997 there were 489 holders of record of the Company's common stock. The Company has neither declared nor paid any dividends since its initial public offering on June 22, 1993. The payment of any dividends in the future will be at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, operations, capital requirements, loan restrictions, the general financial condition of the Company and general business conditions. 17 Item 6. Selected Financial Data The selected consolidated financial data presented below is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements, Notes thereto, and other financial and statistical information included elsewhere in this report.
Years ended December 31, ___________________________________________ 1996 1995 1994 1993 1992 _______ _______ _______ _______ _______ Income Statement Data: (In thousands, except share data) Net revenues $234,935 $239,797 $193,860 $144,279 $129,147 EBITDA (1) 67,395 71,057 63,228 56,301 49,619 Operating Income 31,012 43,992 41,560 44,996 39,642 Net Income (2) 16,768 23,307 26,462 29,125 25,180 Cash dividends (3) - - - 65,141 24,775 EBITDA per share $ 2.21 $ 2.31 $ 2.05 $ 1.94 $ 1.84 Earnings per share .55 .76 .86 1.00 .93 Balance Sheet Data: (In thousands, except share data) Total Assets $399,971 $373,219 $311,613 $165,674 $104,336 Long term debt 168,200 145,500 116,100 - 28,682 Stockholders' equity 201,018 196,046 171,357 144,836 68,807 Equity per share $ 6.58 $ 6.36 $ 5.56 $ 4.99 $ 2.55 Other Data: Employees 3,805 3,834 3,705 2,159 1,763 Average hotel rooms 2,676 2,411 1,664 908 799 Slot machines 4,150 4,140 4,207 2,409 2,105 Table games 105 113 106 64 59
____________________________ (1) "EBITDA" consists of operating income plus depreciation, amortization, and pre-opening costs ( including pre-opening costs of New York - New York). EBITDA should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) or as a measure of liquidity. (2) Pro forma for 1993 and 1992, reflecting provisions for federal income taxes assuming an effective tax rate of 35% from January 1 through June 22, 1993 (the date of the initial public offering), and a 34% rate for 1992. Also assumes the Company would not have incurred interest on certain subordinated notes in 1993, and would not have recorded the reinstatement of deferred taxes. 18 (3) The Company has not paid any dividends since its initial public offering in June, 1993. Previously, the Company had distributed a substantial portion of its net income as cash dividends to its S corporation stockholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the "Selected Financial Data" and the Consolidated Financial Statements and Notes thereto included elsewhere in this report. Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Summary of Operations The Company continued the process of absorbing the capacity provided by Buffalo Bill's, while continuing to pursue its strategy of enhancing Primm as a destination location. The Tom Fazio designed golf course has been completed and it opened to the public in February 1997. The expansion and upgrade of the Primadonna is under way, and the construction of an upscale factory outlet mall is expected to break ground in mid-1997. The Company continued its focus on marketing in an effort to absorb mid-week capacity. With the addition of comprehensive player tracking systems, the Company is now positioned to more effectively execute its direct mail marketing campaigns. There were an additional 52,000 occupied rooms during 1996, a substantial portion of which were during the mid-week period. Net revenues, before the equity loss from NEW YORK-NEW YORK, increased to $242.8 million, an increase of 1.2%. Net income was $16.8 million, a decline of $6.5 million, which was primarily due to the $7.8 million loss from NEW YORK- NEW YORK, $1.1 million in pre-opening costs associated with the golf course, a $2.3 million increase in selling, general and administrative expenses, and a $900,000 increase in the cost of promotional allowances, offset by a $3.0 million decrease in interest expense and the corresponding $3.5 million reduction in the tax provision. Revenues Overall casino revenue of $170.4 million was virtually unchanged from the prior year. Slot revenue increased $1.4 million, while table games revenue declined $1.3 million, yielding a net increase of $118,000 in casino revenue. Food and beverage revenue increased to $29.7 million from $28.1 million, an increase of $1.6 million, or 5.7%. The increase is primarily due to increased food covers, coupled with selected beverage price increases. Hotel revenue increased to $23.6 million from $19.8 million, an increase of $3.8 million, or 19.4%. An increase in rooms sold, including a substantial increase in complimentary rooms provided to customers, coupled with a 10% increase in rates, were the primary causes of the increase. The increase in complimentary rooms contributed $2.4 million of the revenue increase, while cash revenues contributed $1.4 million. 19 Entertainment revenue declined to $11.7 million from $13.2 million, a decrease of $1.5 million, or 11.0%. The decline was primarily due to the reduced ridership on "The Desperado" roller coaster, the log flume ride, and the motion theaters. These declines were compounded by "The Desperado" being out of service for repairs during 20 days of the peak summer season, and the log flume ride undergoing extensive renovations to make the ride more interactive and exciting, which caused it to be out of service for 30 days. The motion theaters are located in close proximity to the other two rides, and management believes that they were impacted by the reduced levels of activity in the area when each of the two primary rides was out of service. To address the declining volume in this area, the Company is installing a new thrill ride, the "Turbo Drop", which the Company anticipates will reinvigorate this segment of its business, upon its completion in April 1997. Service station revenue increased to $15.0 million from $13.0 million, an increase of $2.0 million, or 15.6%. This increase was due to a 7% increase in gallons sold coupled with an 8% increase in prices. Other revenue declined $356,000, or 5.2%, primarily due to reduced volume in the gift shops. Equity loss in NEW YORK-NEW YORK is the Company's share of earnings from its 50% interest in NEW YORK-NEW YORK Hotel & Casino. The property was completed in December 1996, and opened to the public on January 3, 1997. Accordingly, in 1996, NEW YORK-NEW YORK wrote-off its pre-opening costs of $15.8 million and incurred a small operating loss, offset slightly by interest income. The Company's 50% share of this loss amounted to a $7.8 million. Costs and Expenses Casino expenses increased to $51.7 million from $49.8 million, an increase of $1.9 million, or 3.7%. The increase was primarily due to increased promotional allowances, which are all charged to casino expense, along with increases in payroll and related benefits. Food and beverage costs increased $1.2 million, or 4.6%, primarily as a result of the increased volume. Hotel costs increased $401,000, or 3.7%, due primarily to an additional 52,000 occupied rooms. Service station costs increased $1.9 million, or 15.8%, due to higher product cost and increased volume. Selling, general and administrative expenses increased to $44.6 million from $42.3 million, an increase of $2.3 million, or 5.4%. The increase is primarily a result of an $829,000 increase in bus promotions, a $345,000 increase in general marketing expenses, an incremental $450,000 related to the departure of the Company's former president, and an increase of $672,000 in development expenses, offset by a decrease of $206,000 in legal and other professional fees. Pre-opening costs of $1.1 million related to the completion of the Primm Valley Golf Club were recorded in 1996. There were no such costs in 1995. Interest Income (Expense) Interest expense, net, was $4.9 million as compared to $7.9 million in the prior year. The Company incurred $11.4 million of interest of which $6.1 million was capitalized as part of the NEW YORK-NEW YORK investment and the 20 golf club development, and earned interest income of $400,000. In 1995, the Company incurred $12.9 million of interest, of which $4.7 million was capitalized, and earned interest income of $300,000. The decrease in interest incurred is due to a decline in interest rates offset by a slight increase in the average long-term debt outstanding. Income Taxes Income taxes decreased $3.5 million due primarily to lower earnings before taxes. The Company's effective tax rate was not materially different from the prior year. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Summary of Operations During 1995 the Company embarked on several projects to further develop its Primm complex and enhance its position as a destination location. The addition in June of a second tower at Buffalo Bill's increased its available rooms to 1,239, and that of the entire complex to 2,676, enabling the Company to further capitalize on weekend demand. In July, the Company initiated an aggressive marketing campaign targeting the Southern California market. The program was designed both to introduce new customers to the resort complex, and also to increase the awareness of the enhanced gaming and entertainment facilities for customers who had not visited since the opening of Buffalo Bill's. Although the weekend demand continued to be strong, as evidenced by high room occupancy and casino utilization, an expanded market penetration is necessary to fully exploit the idle mid-week capacity. A championship 18 hole golf course, designed by world renowned golf course architect Tom Fazio, was begun with expected completion in late 1996. This championship course, combined with the completion of the conference center, is expected to enable the Company to more effectively utilize its mid-week capacity. Additionally, the proposed Gordon-Brant retail outlet mall, initially scheduled to break ground in the summer of 1996, is expected to further entice mid-week travelers, although this proposed project will not be completed until mid-1998. Net revenues increased to $239.8 million, an increase of 23.7%, while net cash provided by operating activities increased to $61.7 million, an increase of 16.1%. Despite these increases, net income declined 11.9% to $23.3 million, primarily due to increased casino expenses, coupled with increased marketing, advertising, depreciation and interest expense. Revenues Net revenues increased to $239.8 million from $193.9 million, an increase of 23.7%. Although casino revenue continued to be the largest revenue component, and contributed the largest dollar increase, $25.4 million, it represented 71.0% of net revenues in 1995 compared to 74.8% in 1994, and 78.4% in 1993. This shift in revenue source is primarily due to the expanded Primm complex and the attendant amenities now offered. This change in revenue mix yields 21 lower operating income margins as a larger proportion of revenues is derived from other less profitable sources. Casino revenues increased to $170.3 million from $144.9 million, an increase of $25.4 million, or 17.5%. Slot revenue accounted for $20.0 million of this increase, while table games revenue provided $5.4 million of the increase. These increases resulted primarily from the full year of operations at Buffalo Bill's, which opened in August 1994, and provided increases in casino capacity, available and occupied rooms, and attracted additional visitors from Interstate 15. Food and beverage revenues increased to $28.1 million from $21.3 million, an increase of $6.8 million, or 31.9%. The full year of Buffalo Bill's, along with the added hotel tower, yielded a significant increase in the number of meals and drinks served. The increase in food and beverage promotional allowances contributed $2.3 million to the increase, while cash sales contributed $4.5 million to the increase. Hotel revenues increased to $19.8 million from $12.3 million, an increase of $7.5 million, or 61.1% The full year of operations at Buffalo Bill's, including the second tower addition in June 1995, provided significant additional capacity. The number of rooms sold at the Primm complex increased 30.4% to 635,000, while the average daily room rate increased 26.1%. Entertainment revenues increased by $7.7 million to $13.2 million. This increase primarily resulted from the full year of operations of the attractions at Buffalo Bill's: "The Desperado" roller coaster, the Star of the Desert Arena, and the arcade facilities. Service station revenues increased by $500,000, or 3.8%, as a result of slight increases in the number of gallons sold. Other revenues increased to $6.8 million from $4.4 million, an increase of $2.4 million, or 53.8%. This increase was primarily due to the full year of operations of the retail outlets and Buffalo Bill's, coupled with increased income from commissions and vending machines. Costs and Expenses Casino expenses increased to $49.8 million from $38.5 million, an increase of $11.3 million, or 29.5%. This increase was primarily due to payroll costs for the full year at Buffalo Bill's, increased promotional allowances (all of which are charged to casino expenses), and increased gaming taxes. Food & beverage costs increased to $26.0 million from $21.4 million, an increase of $4.6 million, or 21.7%. This increase resulted from increases in both payroll and cost of goods sold, that were necessary to accommodate the increased meal and drinks served. These increases were partially offset by the increase in food and beverage promotional allowances, the cost of which are charged to casino expenses. Hotel expenses increased to $11.0 million from $7.8 million, an increase of $3.2 million, or 40.3%. This increase was primarily due to the additional rooms available, and occupied, at Buffalo Bill's. 22 Entertainment expenses increased to $5.6 million from $3.3 million, an increase of $2.3 million, or 72.4%. This increase was primarily due to a full year of costs associated with the rides and attractions at Buffalo Bill's, coupled with the increased expenses for headliner entertainment in the Star of the Desert Arena, which opened in January 1995. Service station expenses increased $400,000, or 3.9%. This increase resulted from an increase in the cost of goods sold to support increased volumes, and a slight increase in other operating costs. Other expenses increased by $800,000, or 32.7%. This increase resulted from an increase in cost of goods sold to support the increased sales volumes in the retail outlets, and vending machines. Selling, general and administrative expenses increased to $42.3 million from $31.9 million, an increase of $10.4 million, or 32.9%. This increase is primarily attributable to increased advertising ($3.6 million), marketing and bus promotions ($1.0 million), administrative payroll ($2.3 million), professional fees and development costs ($1.5 million), and increased security and porter staffs to service the expanded facility ($1.9 million). Property costs increased to $19.0 million from $14.0 million, an increase of $5.0 million, or 35.4%. This increase is a result of increased rent expense ($1.2 million), utilities ($1.3 million), repairs and maintenance ($1.5 million), and property taxes and insurance ($1.0 million). All of these increases primarily reflect the added capacity costs for Buffalo Bill's, including the second tower addition. Depreciation and amortization expense increased to $27.1 million from $18.7 million, an increase of $8.4 million, or 44.9%. This increase was primarily due to a full year of operations at Buffalo Bill's. The Company did not incur any pre-opening costs in 1995 compared to $3.0 million in 1994, which was attributable to the opening of Buffalo Bill's. Interest Income (Expense) Interest expense, net, increased to $7.9 million from $2.3 million, an increase of $5.6 million. The increase is due to an increase in long-term debt outstanding, coupled with the fact that in 1994 all interest expense incurred during the first seven months was capitalized as part of the construction cost of Buffalo Bill's. Income Taxes Income tax expense was $12.8 million in both 1995 and 1994, despite a decrease in income before taxes. During the third quarter of 1994, the Internal Revenue Service completed an audit of the Company's tax returns as a Subchapter S corporation. The audit resulted in additional tax liabilities for the former Subchapter S shareholders. As explained more fully in the 1994 discussion, the Company's deferred tax liability was reduced, on a one-time basis, by $1.2 million which, correspondingly, reduced the 1994 tax provision by the same amount. 23 Liquidity and Capital Resources The Company held cash and cash equivalents of $10.0 million. Net cash provided by operations was $55.9 million compared to $61.7 million in the prior year. The Company funds its daily operations through cash flow from operations. The Company borrows funds for significant capital expenditures and investments, such as a portion of its NEW YORK-NEW YORK equity investment, which cannot be fully funded out of operating cash flows. The Company has a $250 million Reducing Revolving Credit Facility, ("Agreement", see Note 8 of the Consolidated Financial Statements). At December 31, 1996 the amount outstanding under the Agreement was $167,800,000 at an average all-in rate of 7.8%. The Company is a 50% joint venture partner with MGM Grand, Inc. ("MGM") in the NEW YORK-NEW YORK Hotel & Casino, LLC. The joint venture secured a $285 million Construction/Revolving loan from Bank of America as agent for a sixteen bank consortium. At December 31, 1996, the full $285 million was outstanding. The Company and MGM executed Keep-Well Agreements in conjunction with the bank loan. In January 1997, the joint venture obtained an additional $20 million of term loan financing. The Company may contribute up to approximately $7.0 million in additional equity to fund remaining construction liabilities. In September 1995, amended November 1996, the Board of Directors approved a stock repurchase program authorizing the Company to acquire up to $50 million worth of its outstanding shares. The Company had acquired 835,000 shares for $13.3 million at December 31, 1996, and an aggregate of 935,000 shares at a cost of $15.1 million at February 28, 1997. In September 1995, the Company announced that Sheldon Gordon and Randy Brant, developers of the Forum shops at Ceasars Palace, along with the TrizecHahn Centers, intended to develop, in two phases, up to a one million square foot themed shopping facility on 100 acres of land that is owned by the Primm South Real Estate Company and is adjacent to the Primadonna. For its part, the Company expects to incur approximately $1.5 million for infrastructure costs to accommodate this planned development. The facility is to be built and financed by the developers. The first phase of approximately 600,000 square feet is expected to be completed by mid-1998. The Company has granted two loans to the Southwest Casino and Hotel Corp. ("Southwest" See Other Projects). Southwest was required to post a reducing standby letter of credit of $800,000 in favor of the Kickapoo Tribe, which the Company has posted on behalf of Southwest. Southwest is reimbursing the Company for the costs incurred. The remaining balance on the letter of credit at December 31, 1996, was $601,000. Capital requirements for 1997 include $13.5 million for the second phase of the Primm Valley Golf Club, $18.0 million for the Primadonna expansion and infrastructure, $3.0 million for the conference center, $5.4 million for an 24 upgraded and expanded monorail system, and $10.0 million for maintenance of existing facilities, and up to $7.0 million of additional equity for NEW YORK- NEW YORK. The Company believes that its current cash flow, coupled with its bank facility, provides both the resources and flexibility to meet existing obligations and to fund its commitments on the projects discussed above. The Company continues to actively pursue other gaming opportunities and, if successful in securing another location, depending upon the amount of funding required, the Company may need to obtain additional bank or vendor financing, or issue public or private debt or equity, or a combination thereof. Certain statements contained in this Annual Report on Form 10-K that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "estimate", or the negative thereof, or other variations thereon, or comparable terminology. These statements are subject to a number of risks and uncertainties, including but not limited to, those set forth under "Business Risks". 25 Item 8. Consolidated Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page no. Report of Independent Public Accountants......................... 27 Consolidated Balance Sheets as of December 31, 1996 and 1995..... 28 - 29 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994................................. 30 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995, and 1994................ 31 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994........................... 32 - 33 Notes to Consolidated Financial Statements....................... 34 - 45 New York - New York Hotel & Casino, LLC Financial Statements and Supplementary Data................................ 46 - 59 26 EX-99 2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Primadonna Resorts, Inc.: We have audited the accompanying consolidated balance sheets of Primadonna Resorts, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Primadonna Resorts, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Arthur Andersen LLP Las Vegas, Nevada January 29, 1997 27 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Amounts in Thousands) December 31, 1996 1995 ________ ________ CURRENT ASSETS: Cash and cash equivalents $ 10,027 $ 9,148 Accounts and notes receivable 1,170 3,311 Income tax refund receivable 221 994 Inventories 2,713 2,514 Prepaid expenses and other 5,790 6,587 ________ ________ Total current assets 19,921 22,554 ________ ________ PROPERTY AND EQUIPMENT: Buildings and improvements 187,756 186,001 Land improvements 90,950 66,032 Furniture, fixtures and equipment 130,169 119,318 ________ ________ 408,875 371,351 Less: accumulated depreciation and amortization (116,183) (89,999) ________ ________ 292,692 281,352 Land 4,274 3,603 Construction in progress 3,949 8,170 ________ ________ 300,915 293,125 INVESTMENT IN JOINT VENTURE 68,593 49,561 ________ _______ NOTES RECEIVABLE, net 2,926 2,110 ________ ________ OTHER ASSETS 7,616 5,869 ________ ________ $399,971 $373,219 ======== ========
The accompanying notes are an integral part of these consolidated statements. 28 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Amounts in Thousands Except Share Data)
December 31, 1996 1995 ________ ________ CURRENT LIABILITIES: Accounts payable-trade $ 5,599 $ 7,118 Accrued expenses 10,684 9,089 Current portion of long-term debt 1,100 - ________ ________ Total current liabilities 17,383 16,207 ________ ________ LONG-TERM DEBT, net of current portion 168,200 145,500 ________ ________ DEFERRED INCOME TAXES PAYABLE 13,370 15,466 ________ ________ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding Common stock, $.01 par value; 100,000,000 shares authorized; 30,002,975 and 30,765,375 shares issued and outstanding in 1996 and 1995, respectively 308 308 Additional paid - in capital 128,236 127,179 Retained earnings 85,767 68,999 Less: treasury stock, at cost (13,293) (440) ________ ________ 201,018 196,046 ________ ________ $399,971 $373,219 ======== ========
The accompanying notes are an integral part of these consolidated statements. 29 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands Except Share Data)
Years Ended December 31, _________________________________ 1996 1995 1994 ________ ________ ________ REVENUES: Casino $170,395 $170,277 $144,939 Food and beverage 29,709 28,095 21,298 Hotel 23,584 19,756 12,263 Entertainment 11,750 13,207 5,489 Service station 14,984 12,966 12,490 Other 6,433 6,789 4,415 Equity loss in New York - New York (7,842) - - ________ ________ ________ 249,013 251,090 200,894 Less: promotional allowances (14,078) (11,293) (7,034) ________ ________ ________ Net revenues 234,935 239,797 193,860 ________ ________ ________ COSTS AND EXPENSES: Casino 51,661 49,799 38,469 Food and beverage 27,214 26,017 21,385 Hotel 11,369 10,968 7,816 Entertainment 5,492 5,636 3,270 Service station 13,846 11,958 11,510 Other 2,922 3,046 2,296 Selling, general and administrative 44,611 42,330 31,859 Property costs 18,306 18,986 14,027 Depreciation and amortization 27,358 27,065 18,673 Pre-opening costs 1,144 - 2,995 ________ ________ ________ 203,923 195,805 152,300 ________ ________ ________ Income from operations 31,012 43,992 41,560 OTHER INCOME (EXPENSE) Interest expense, net (4,923) (7,875) (2,342) ________ ________ ________ Income before income taxes 26,089 36,117 39,218 INCOME TAXES: Income tax provision 9,321 12,810 12,756 ________ ________ ________ NET INCOME: $ 16,768 $ 23,307 $ 26,462 ======== ======== ======== Earnings per share $0.55 $0.76 $0.86 ======== ======== ======== Weighted average number of shares of common stock outstanding 30,535,221 30,801,430 30,818,432 ========== ========== ==========
The accompanying notes are an integral part of these consolidated statements. 30 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Amounts in Thousands Except Share Data)
Additional Common Stock Treasury Paid-in Retained Shares Amount Stock Capital Earnings Total __________ ______ ________ _______ ________ ________ Balances, December 31, 1993 30,670,000 $307 $ - $125,299 $19,230 $144,836 Net income - - - - 26,462 26,462 Exercise of stock options 3,875 - - 59 - 59 ___________ _____ _______ ________ ________ _________ Balances, December 31, 1994 30,673,875 307 - 125,358 45,692 171,357 Net income - - - - 23,307 23,307 Exercise of stock options 121,500 1 - 1,821 - 1,822 Purchase of treasury stock (30,000) - (440) - - (440) ___________ _____ ________ _______ _______ ________ Balances, December 31, 1995 30,765,375 308 (440) 127,179 68,999 196,046 Net income - - - - 16,768 16,768 Exercise of stock options 42,600 - - 1,057 - 1,057 Purchase of treasury stock (805,000) - (12,853) - - (12,853) ___________ _____ ________ _______ _______ ________ Balances, December 31, 1996 30,002,975 $308 $(13,293) $128,236 $85,767 $201,018 =========== ===== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated statements. 31 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)
Year Ended December 31, _________________________________ 1996 1995 1994 ________ ________ ________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 16,768 $ 23,307 $ 26,462 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,358 27,065 18,673 Amortization of debt issuance costs 425 536 185 Equity loss in New York - New York 7,842 - - Allowance for doubtful accounts 1,852 - - Pre-opening costs 1,144 - 2,995 Increase in life insurance cash surrender value (75) (299) - Gain on sale of assets (314) (334) - Deferred income taxes (1,771) 6,147 3,786 Change in current assets and liabilities due to operating activities: (Increase) decrease in accounts and notes receivable 1,581 (764) (7) (Increase) decrease in income tax refund receivable 773 1,862 (2,856) (Increase) in inventories (199) (196) (1,029) (Increase) decrease in prepaid expenses and other 472 (883) (549) Increase (decrease) in accounts payable - trade (1,519) 2,352 2,562 Increase in accrued expenses 1,595 2,931 3,595 Decrease in income taxes payable - - (675) ________ ________ ________ Total adjustments 39,164 38,417 26,680 ________ ________ ________ Net cash provided by operating activities 55,932 61,724 53,142 ________ ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (35,158) (36,970) (155,463) Decrease in construction payables - (4,621) (6,032) Investment in joint venture (26,874) (45,687) (5,845) Increase in other assets (4,670) (3,438) (1,580) Proceeds from disposal of other assets 789 2,940 - Pre-opening costs (1,144) - (2,995) ________ ________ ________ Net cash used in investing activities (67,057) (87,776) (171,915) ________ ________ ________
The accompanying notes are an integral part of these consolidated statements. 32 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands)
Year Ended December 31, _________________________________ 1996 1995 1994 ________ ________ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock $ 1,057 $ 1,822 $ 59 Purchase of treasury stock (12,853) (440) - Proceeds from issuance of long-term debt 70,400 209,400 115,000 Debt issuance costs - (1,504) (1,771) Principal payments of long-term debt (46,600) (180,000) - _______ ________ ________ Net cash provided by financing activities 12,004 29,278 113,288 _______ ________ ________ Net increase (decrease) in cash and cash equivalents 879 3,226 (5,485) Cash and cash equivalents, beginning of year 9,148 5,922 11,407 ________ ________ ________ Cash and cash equivalents, end of year $ 10,027 $ 9,148 $ 5,922 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. 33 PRIMADONNA RESORTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATIONAL STRUCTURE AND BASIS OF PRESENTATION The consolidated financial statements of Primadonna Resorts, Inc., a Nevada corporation, include the accounts of its wholly-owned subsidiaries, The Primadonna Corporation, PRMA Land Development Company, and PRMA Las Vegas, Inc. (collectively, the "Company"). The Company owns and operates three hotel- resort/casinos; Whiskey Pete's Hotel & Casino ("Whiskey Pete's"), Primadonna Resort & Casino ("Primadonna"), and Buffalo Bill's Resort & Casino ("Buffalo Bill's"). Investments in unconsolidated affiliates which are 50% or less owned are accounted for under the equity method. All of the Company's existing business activities are conducted by The Primadonna Corporation. PRMA Land Development Company owns and operates the Company's Primm Valley Golf Club in California. PRMA Las Vegas, Inc. holds the Company's investment in a joint venture with MGM Grand, Inc., which owns and operates the NEW YORK-NEW YORK Hotel & Casino, LLC in Las Vegas, Nevada. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses for the reported periods. Actual results may differ from those estimates. Significant intercompany and interdivision accounts and transactions have been eliminated. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Casino Revenues and Promotional Allowances Casino revenues represent the net win from gaming wins and losses. The retail value of food, beverage, and hotel rooms provided to customers without charge, is included in gross revenues, and then deducted as promotional allowances. The estimated departmental costs of providing such promotional allowances is included in casino costs and expenses as follows:
Years Ended December 31, 1996 1995 1994 ________ ________ ________ (In thousands) Food and beverage $ 6,534 $ 6,536 $ 4,388 Hotel 2,403 1,265 888 Other 1,022 1,273 293 ________ _______ _______ $ 9,959 $ 9,074 $ 5,569 ======== ======== ========
34 b. Cash and Cash Equivalents Cash equivalents are stated at market value and consist of highly liquid investments with a maturity of less than three months. There were no significant or unrealized gains or losses from cash equivalent investments during the years ended December 31, 1996, 1995, and 1994. The Company's cash management policies, at times, causes deficit ledger balances in the general disbursement accounts, which amounted to $2,089,000 and $2,203,000 at December 31, 1996 and 1995, respectively. c. Inventories Inventories are valued at the lower of cost or market as determined on the first-in, first-out method. d. Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are provided for on the straight-line method over the following estimated useful lives: Buildings and improvements 10 to 40 years Land improvements 5 to 15 years Furniture, fixtures and equipment 3 to 12 years Normal repairs and maintenance are charged to expense when incurred. Expenditures which materially extend the useful life of assets are capitalized. e. Capitalized Interest The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. Interest capitalized was $6,100,000, $4,665,000, and $2,048,000 for the years ended December 31, 1996, 1995, and 1994, respectively. f. Pre-Opening Costs During construction of a new facility, the Company defers certain operating costs, including incremental salaries and wages, as pre-opening costs. Upon substantial completion of the facilities or commencement of operations, the Company expenses all such pre-opening costs. g. Stock Options The Company has adopted SFAS No. 123- "Accounting for Stock Based Compensation". As provided by SFAS No. 123, the Company accounts for stock options under Accounting Principles Board (APB) Opinion No. 25- "Accounting for Stock Issued to Employees". The Company discloses the pro forma net income and earnings per share effect as if the Company had used the fair value based method prescribed under SFAS No. 123. 35 h. Development Costs The Company defers costs associated with projects in jurisdictions in which gaming has been approved and the Company has identified a site; otherwise these costs are expensed as incurred. i. Reclassifications The consolidated financial statements for prior periods reflect certain reclassifications to conform with classifications adopted in 1996. 3. STATEMENT OF CASH FLOWS The following supplemental disclosures are provided as part of the accompanying consolidated statements of cash flows:
Years Ended December 31, 1996 1995 1994 ________ ________ ________ (In thousands) Cash payments made for interest (net of amounts capitalized) $ 5,274 $ 6,899 $ 1,753 ======== ======== ======== Cash payments made for income taxes $ 9,900 $ 4,800 $ 12,500 ======== ======== ========
4. INVESTMENT IN JOINT VENTURE On December 28, 1994 the Company and MGM Grand, Inc.("MGM"), formed a joint venture to own and operate the NEW YORK - NEW YORK Hotel & Casino, LLC. The hotel/casino, which cost $460 million, was completed in December 1996. The Company holds a 50% interest in the joint venture. The Company has contributed $62.5 million in cash and certain rights to the New York theme from a third party licensor to the joint venture. MGM has contributed $22.5 million in cash and land upon which the property is located, valued at $41.2 million, to the joint venture. The joint venture secured limited recourse bank financing of $285 million, and term loan financing of $20 million, which funded the construction of, and equipment for, the hotel/casino. The joint venture partners have executed Keep-Well Agreements in conjunction with the financing. Summary condensed financial information for the joint venture is as follows:
Year Ended December 31, 1996 ____________________________ (In thousands) Net revenues $ 345 Operating loss (15,830) Interest income, net 147 Net loss (15,683) Total assets $457,090 Long-term debt 285,000 Member equity 111,664
36 Pre-opening costs of $15,762,000 were expensed in the year ended December 31, 1996, and are included in the operating loss reflected above. 5. NOTES RECEIVABLE The Company entered into an agreement to loan Southwest Casino and Hotel Corp. ("Southwest"), a developer and manager of Native American gaming enterprises, $1,600,000. This Convertible Term Promissory Note bears interest at 8%. Interest is payable quarterly beginning January 15, 1997, and the principal is due on or before July 15, 2000. This note may be converted, in whole, into 16,000 shares of Series B Convertible Preferred Stock. Southwest has not made payments on the note, and collectability is in doubt. The Company has recorded a reserve of $1,600,000 on the note and further reserved $252,000 of interest due. Additionally, the Company entered into a Demand Promissory Note with Southwest in July 1995 to loan an aggregate of $2,248,000 to Southwest for construction of the Kickapoo gaming facility in Eagle Pass, Texas. The note bears interest at 12% for the first six months, 15% the next six months, and 18% thereafter. Principal and interest are payable on demand, or, if no demand, $24,800 monthly beginning December 1996, $34,800 monthly beginning December 1997, $70,000 monthly beginning December 1998, with the remaining principal and interest due December 31, 1999. The note also requires the borrower to use its best efforts to obtain take-out financing in an amount equal to at least 75% of the principal amount of the note. Amounts advanced at December 31, 1996 and 1995 were $2,248,000 and $438,000, respectively. At December 31, 1996, $151,000 of accrued interest is outstanding, and classified as long-term. Southwest has not made payments on this note since the December 1996 payment. This note is secured by the management contract on the Kickapoo gaming facility, a deed of trust, and a UCC-1 financing statement. No reserve has been recorded on this note. In connection with casino development efforts in Maryland, the Company entered into a letter of intent ("Letter") for a proposed joint venture. Pursuant to the terms of the Letter, the Company advanced funds for the development of an office and apartment building, which would have included a casino entertainment complex. The Letter was terminated on December 20, 1995, and the amounts advanced at December 31, 1995 were $1,246,000. The notes outstanding were non-interest bearing until the maturity date, December 20, 1996, at which time the notes were paid. 37
Years Ended December 31, 1996 1995 ________ ________ (In thousands) Convertible Term Promissory Note, 8%, due July 15, 2000, and related interest $ 1,852 $ 1,600 Demand Promissory Note, 12-18%, due December 1, 1999, and related interest 2,399 634 Promissory Note, non-interest bearing, due December 20, 1996 - 923 Promissory Note, non-interest bearing, due December 20, 1996 - 323 Amount due on life insurance policies(Note 6) 527 510 Allowance for doubtful accounts (1,852) - ________ ________ 2,926 3,990 Less: current portion - 1,880 ________ ________ $ 2,926 $ 2,110 ======= =======
6. LIFE INSURANCE Included in Other Assets is the cash surrender value of various life insurance policies held on behalf of the Company's principal shareholder and Chairman of the Board. The aggregate face value of all policies was $94 million at December 31, 1996 and 1995. The Company is the primary beneficiary on $24 million of face value on the policies. The Company's principal shareholder and Chairman of the Board has agreed to reimburse the Company, with respect to certain policies with a face value of $70 million, for the difference between premiums paid by the Company and such policies' cash surrender value. 7. ACCRUED EXPENSES Accrued expenses consist of the following:
Years Ended December 31, 1996 1995 ________ ________ (In thousands) Compensation and related benefits $ 4,422 $ 3,837 Unredeemed chips and token liability 1,178 601 Accrued gaming taxes 716 852 Progressive jackpot liabilities 652 703 Accrued sales and use taxes 1,235 883 Accrued interest 1,040 1,490 Other 1,441 723 _______ _______ $ 10,684 $ 9,089 ======= =======
38 8. LONG-TERM DEBT As of December 31, 1996 and 1995, the Company had an outstanding balance of $167,800,000 and $144,000,000, respectively, on its Reducing Revolving Bank Credit agreement. The Company incurred a liability in connection with the acquisition of the NEW YORK-NEW YORK theme rights of $1,100,000, due January 6, 1997, and $400,000 due January 7, 1998. At December 31, 1996, the $1,100,000 due for the theme rights is reflected as a current obligation. The Reducing Revolving Bank Credit agreement entered into on December 28, 1993, was amended and restated on July 17, 1995, and amended on March 27, 1996 (the "Agreement"). The Agreement provides for a maximum principal balance of $250,000,000, with scheduled reductions which will reduce the maximum permitted balance to $212,500,000 as of August 18, 1997, $175,000,000 as of February 18, 1999, $125,000,000 as of February 18, 2000, with the remaining principal balance due July 18, 2000. The Agreement provides for interest payments at least quarterly, at the prime rate or LIBOR, plus a sliding margin, based primarily upon the Company's debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio. The margin for the prime rate ranges between 0% and 1.0%, while the margin for LIBOR ranges between 1.0% and 2.0%. The weighted average interest rate at December 31, 1996, was 7.8% and at December 31, 1995, was 7.5%. The Company incurs commitment fees of .35% to .5% for the unused portion of the Agreement, depending upon the debt to EBITDA ratio achieved by the Company. The obligation is secured by a deed of trust on all real property, leasehold interests in real property, and personal property of the Company. The Agreement contains certain restrictive covenants relating to the use of proceeds, sale or transfer of assets, the incurrence of additional debt over a specified level, capital expenditures, maintenance of certain minimum financial ratios, and a minimum tangible net worth. 9. INCOME TAXES The Company files a consolidated federal income tax return. The provision (benefit) for income taxes consists of the following:
Years Ended December 31, 1996 1995 1994 ________ ________ ________ (In thousands) Current $ 11,092 $ 6,663 $ 8,970 Deferred (1,771) 6,147 3,786 ________ ________ ________ $ 9,321 $ 12,810 $ 12,756 ======== ======== ========
39 The tax effect of significant temporary differences representing deferred tax assets and liabilities for the Company is as follows:
Years Ended December 31, 1996 1995 ________ ________ (In thousands) Deferred tax assets (liabilities): Current Progressive jackpots $ 55 $ 179 Accrued vacation, workers compensation, and group health 389 377 Inventories 30 170 Outstanding chip and token liability 182 176 Other (59) 20 ________ ________ 597 922 ________ ________ Long-term: Depreciation (16,634) (15,531) Pre-opening costs 394 - Bad debt allowances 648 - Joint venture timing differences 2,185 - Other 37 65 ________ _______ (13,370) (15,466) ________ _______ $(12,773) $(14,544) ======== ========
The Company did not record a valuation allowance at December 31, 1996 or 1995, relating to recorded tax benefits, because all benefits are likely to be realized. The net current deferred tax asset is included in Prepaid expenses and other in the accompanying consolidated balance sheets. The provision for income taxes differs from the amount computed at the federal statutory rate as a result of the following:
Years Ended December 31, 1996 1995 1994 _____ _____ _____ Federal Statutory rate 35% 35% 35% Permanent differences 1 - 1 Change in deferred tax liability due to IRS adjustment of S corporation taxable income - - (3) _____ _____ _____ Effective tax rate 36% 35% 33% ===== ===== =====
In 1994, the Internal Revenue Service (IRS) completed an audit of the Company's income tax returns as a Subchapter S corporation for the fiscal years 1990 to 1993. As a result of the audit, an additional tax liability, due primarily to 40 adjustments of certain fixed asset depreciable lives, was assessed against the Company's then Subchapter S shareholders. Because the adjustment decreased the differences between accounting and tax expense items, the deferred tax liability and tax provision were reduced, on a one-time basis, by $1.2 million. 10. LEASES The Company entered into a lease agreement on July 1, 1993 which covers the property upon which Whiskey Pete's, Primadonna, and Buffalo Bill's are located. The land is owned by Primm South Real Estate Company ("Primm South"). Certain shareholders and one Director of the Company are shareholders of Primm South. The lease has an initial term of 50 years, with an option to extend for one additional 25 year period. Monthly lease payments were $258,000 through June 1994, $417,000 through June 1995, $429,000 through June 1996, and are currently $441,000 through June 1997. Lease payments are subject to annual increases based upon the Consumer Price Index, not to exceed 8% per year. The lease provides for the base rent to be adjusted every 8 years, based upon appraisal. The Company is required to pay all taxes, insurance, utilities, and maintenance expenses related to the property. The lease further provides the Company with the exclusive right to conduct gaming activities on the landlord's property in Primm, Nevada, for 10 years, for a $100,000 annual fee. This right can be extended, at the Company's option, for consecutive 10 year periods so long as the Company is in compliance with the lease agreement. At each renewal period, the fee will be increased by the Consumer Price Index, subject to a maximum annual increase of 8%. Future minimum lease payments, for all leases with noncancelable lease terms in excess of one year, at December 31, 1996 are as follows:
Years ending December 31, _________________________ (In thousands) 1997 $ 5,446 1998 5,410 1999 5,393 2000 5,393 2001 5,393 Thereafter $219,784
Rent expense is as follows:
Years Ended December 31, 1996 1995 1994 ________ ________ ________ (In Thousands) $ 5,609 $ 5,764 $ 4,615 ======== ======== ========
41 11. RELATED-PARTY TRANSACTIONS The Company leases certain property from Primm South as discussed in Note 10. Included in property costs and expenses for the years ended December 31, 1996, 1995 and 1994, is a lease expense of $5,320,000, $5,175,000, and $4,021,000, respectively. The Company has an agreement with the Chairman of the Company that provides for each party to share undivided interests of 75% and 25%, respectively, in a jet aircraft. Operational expenses are borne by the participants based upon actual flight hours utilized by each party. The Company had entered into an agreement with one of the Company's shareholders, to display advertising on a race car owned by the shareholder's company. The agreement was ended in 1994. In 1994, the Company paid $250,000 to the shareholder's racing company. In September 1996, the Company entered into a new two-year agreement with a director of the Company for certain consulting services. Contract terms provide for monthly payments of $12,500 and include an option to renew the agreement for one additional year. The agreement provides for a waiver of any fees to which the director would otherwise be entitled to in his capacity as a director of the Company. This agreement replaces a substantially similar agreement executed in September 1993 for a one year term with two one year renewal options. The Company exercised its option to renew the agreement in September 1994 and 1995. Fees of $150,000 were incurred for the years ended December 31, 1996, 1995, and 1994. The director is also a partner in a law firm which provides legal services to the Company. The total amount for such services were $264,000, $250,000, and $284,000 for the years ended December 31, 1996, 1995, and 1994, respectively. 12. CAPITAL STOCK, STOCK OPTIONS AND INCENTIVES a. Authorized Shares The authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, $.01 par value, and 100,000,000 shares of common stock, $.01 par value. The preferred stock may be issued in one or more series having such respective terms, rights, and preferences as are designated by the Board of Directors. No preferred stock has been issued. b. Treasury Stock In September 1995, the Board of Directors authorized the Company to acquire up to $15 million of the Company's outstanding common shares. In November 1996, the Board increased the total stock repurchase authorization to $50 million. As of December 31, 1996, the Company has acquired 835,000 shares for $13.3 million. As of February 28, 1997, the Company had acquired an additional 100,000 shares for $1.8 million. 42 c. Stock Incentive Plan The Company's Board of Directors adopted the 1993 Stock Incentive Plan ("Plan"),amended June 1995, for officers, employees, employee-directors, consultants, or advisors. A maximum of 3,000,000 shares of common stock had been reserved for issuance under the Plan, as amended, which will terminate after 10 years. In November 1995, the Company's Compensation Committee amended all outstanding stock options to reduce the exercise price per share to $15 (the market price on the date of amendment). Excluded from the amendment were those stock options which had been issued in connection with the Company's initial public offering. The Plan is administered by a committee of the Board of Directors appointed for that purpose, which may amend or terminate the Plan, select those who will be granted awards (as defined by the Plan), and determines the amount, type, terms, and conditions of awards. The committee may enter into any arrangements involving the issuance of (i) common stock, (ii) an option, warrant, convertible security, stock appreciation right, or similar right, with an exercise or conversion privilege at a fixed or variable price related to the common stock or other equity securities of the Company, and/or the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any similar security with a value derived from the value of the common stock or other equity securities of the Company, other than securities that do not constitute derivative securities. Option activity under the Stock Incentive Plan was as follows:
Number Price Range of Shares of Options _________ ___________ Balance, December 31, 1993 560,500 $15.00-$32.00 Granted 639,500 $15.00-$31.75 Exercised (3,875) $15.00 Canceled (55,000) $15.00-$32.00 _________ Balance, December 31, 1994 1,141,125 $15.00-$32.00 Granted 987,000 $15.00-$24.75 Exercised (121,500) $15.00 Canceled (785,000) $15.00-$32.00 _________ Balance, December 31, 1995 1,221,625 $15.00 Granted 534,000 $14.25-$24.13 Exercised (42,600) $15.00 Canceled (431,200) $15.00-$21.75 __________ Balance, December 31, 1996 1,281,825 $14.25-$24.13 ==========
As of December 31, 1996, 1995, and 1994, 304,525, 241,225, and 106,625 options, respectively, were exercisable at $15.00. 43 The Company grants stock options to various employees and directors. The options vest ratably over 3 to 5 years, with an expiration 10 years from date of issuance. The exercise price is the market value on the date granted. The weighted average exercise prices of the 1996 and 1995 grants were $19.65 and $15.00, respectively. The Company applies APB Opinion No. 25 and related interpretations in accounting for the plan. Accordingly, no compensation expense has been recognized for the stock options. In accordance with SFAS No. 123, the Company has calculated, on a pro forma basis, the estimated compensation expense related to its stock option programs utilizing the following assumptions for the grants in 1996 and 1995, respectively: the risk free interest rate for 5 year bonds is 5.83% and 6.32%, the expected volatility is 19% and 18% over the 4.39 and 4.45 years weighted average term of the options, and expected forfeitures are 45% in both years. The effect on net income and earnings per share would be as follows:
Years Ended December 31, 1996 1995 ________ ________ (In Thousands, except share data) Net income as reported $ 16,768 $ 23,307 Pro forma $ 16,164 $ 22,946 ======== ======== Primary earnings per share as reported $ .55 $ .76 Pro forma $ .53 $ .74 ====== ===== Fully diluted earnings per share as reported $ .55 $ .76 Pro forma $ .53 $ .74 ====== =====
d. Eligible Directors' Stock Option Plan In 1993, the Company adopted the Eligible Directors' Stock Option Plan ("Directors Plan"). A maximum of 300,000 shares of common stock have been reserved for issuance under the Directors' Plan, which will terminate in 10 years. The Directors' Plan provides that each person who is an eligible director at the time the Company first registers its common stock under Section 12 of the Securities Exchange Act of 1934, as amended, will be granted an option to purchase 4,500 shares of common stock at an exercise price equal to the initial public offering price. At each annual shareholders' meeting, commencing in 1994, each eligible director will receive an option to purchase 4,500 shares of common stock. Any person elected as an eligible director at least 90 days before an annual meeting, will also be granted an option for 4,500 shares. The options granted to the directors are exercisable at a rate of 1,500 shares per year commencing on the first anniversary after the date of grant, provided that all options expire 10 years after the date of grant. The exercise price of the options shall be the fair market value of the common stock on the date of grant of the option. In 1996, the Board of Directors granted each eligible director an additional 5,000 shares. 44 Option activity under the Eligible Directors' Plan was as follows:
Number Price Range of Shares of Options _________ ___________ Balance, December 31, 1993 9,000 $31.25 Granted 9,000 $23.25-$25.25 Canceled (4,500) $31.25 _________ Balance, December 31, 1994 13,500 $23.25-$31.25 Granted 13,500 $15.00-$24.50 _________ Balance, December 31, 1995 27,000 $15.00-$31.25 Granted 28,500 $24.13 __________ Balance, December 31 ,1996 55,500 $15.00-$31.25 ==========
13. COMMITMENTS AND CONTINGENCIES a. Southwest joint venture On January 16, 1996, the Company and Southwest entered into an agreement to fund the development of a casino for the Kickapoo Traditional Tribe of Texas in Eagle Pass, Texas (see Note 5). Southwest was required to post an $800,000 letter of credit in favor of the Kickapoo Tribe. The Company has issued an $800,000 reducing letter of credit on behalf of Southwest. At December 31, 1996, the balance under the letter of credit had been reduced to $601,000. b. Litigation Currently, there are lawsuits pending against the Company arising in the normal course of business. In management's opinion, the ultimate outcome of these matters will not have a material adverse effect on the results of operations or the financial position of the Company. 45 EX-99 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members of NEW YORK-NEW YORK Hotel & Casino, LLC: We have audited the accompanying balance sheets of NEW YORK-NEW YORK Hotel & Casino, LLC, (a Nevada limited liability company in the development stage), (the "Company") as of December 31, 1996 and 1995, and the related statements of operations, changes in members' equity and cash flows for each of the two years in the period ended December 31, 1996 and for the period from inception (December 23, 1994) through December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NEW YORK-NEW YORK Hotel & Casino, LLC as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1996 and for the period from inception through December 31, 1996, in conformity with generally accepted accounting principles. Arthur Andersen LLP Las Vegas, Nevada January 29, 1997 46 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) BALANCE SHEETS ASSETS (in Thousands)
December 31, 1996 1995 ________ ________ CURRENT ASSETS: Cash and cash equivalents $ 6,104 $ 504 Restricted cash 10,868 - Accounts receivable 370 30 Advance deposits 2,207 - Prepaid expenses 1,890 - Inventories 350 46 ________ ________ Total current assets 21,789 580 ________ ________ PROPERTY AND EQUIPMENT: Land 49,563 49,474 Buildings, fixtures and equipment 380,989 - Construction in progress - 107,017 ________ ________ Total property and equipment 430,552 156,491 ________ ________ OTHER ASSETS: Pre-opening expenses - 786 Other assets, net 4,750 3,680 ________ ________ Total other assets 4,750 4,466 ________ ________ TOTAL ASSETS $457,091 $161,537 ======== ========
The accompanying notes are an integral part of these financial statements. 47 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) BALANCE SHEETS LIABILITIES AND MEMBERS' EQUITY (in Thousands)
December 31, 1996 1995 ________ ________ CURRENT LIABILITIES: Current portion of capital lease $ 172 $ - Accounts payable 12,683 187 Accounts payable accrued 10,231 - Construction payables 12,625 14,990 Retention payable 14,596 3,747 Other accrued liabilities 9,291 1,265 ________ ________ Total current liabilities 59,598 20,189 ________ ________ LONG-TERM DEBT: Long-term capital lease 829 - Note payable 285,000 59,001 ________ ________ TOTAL LIABILITIES 345,427 79,190 ________ ________ MEMBERS' EQUITY: Member contributions 127,400 82,400 Deficit accumulated during the development stage (15,736) (53) ________ ________ Total members' equity 111,664 82,347 ________ ________ TOTAL LIABILITIES AND MEMBERS' EQUITY $457,091 $161,537 ======== ========
The accompanying notes are an integral part of these financial statements. 48 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) STATEMENTS OF OPERATIONS (in Thousands)
For the Period From Inception (December 23, For the twelve months 1994) ended December 31, through _________________________________ December 31, 1996 1995 1996 ________ ________ ________ REVENUES $ 345 $ 149 $ 494 ________ ________ ________ COSTS AND EXPENSES: Cost of sales 185 88 273 Operating expenses 228 393 621 Pre-opening costs 15,762 - 15,762 Abandonment loss - 642 642 ________ ________ ________ Total costs and expenses 16,175 1,123 17,298 ________ ________ ________ OPERATING LOSS (15,830) (974) (16,804) OTHER INCOME (EXPENSE) Interest income, net 147 921 1,068 ________ ________ ________ NET LOSS $(15,683) $ (53) $(15,736) ======== ======== ========
The accompanying notes are an integral part of these financial statements. 49 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) STATEMENTS OF CHANGES IN MEMBERS' EQUITY (in Thousands)
Deficit Accumulated MGM PRMA During the GRAND, LAS VEGAS, Development INC. INC. TOTAL Stage ________ ________ ________ ________ INCEPTION, December 23, 1994 $ - $ - $ - $ - Members' contributions 41,200 41,200 82,400 - Net loss (27) (26) (53) (53) ________ ________ ________ ________ Balance, December 31, 1995 41,173 41,174 82,347 (53) Members' contributions 22,500 22,500 45,000 - Net loss (7,841) (7,842) (15,683) (15,683) ________ ________ ________ ________ Balance, December 31, 1996 $ 55,832 $ 55,832 $111,664 $(15,736) ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. 50 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) STATEMENTS OF CASH FLOWS (in Thousands)
For the Period From Inception (December 23, For the twelve months 1994) ended December 31, through _________________________________ December 31, 1996 1995 1996 ________ ________ ________ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(15,683) $ (53) $(15,736) Adjustments to reconcile net income to net cash provided by operating activities: Pre-opening expenses 15,762 - 15,762 Increase in accounts receivable (340) (30) (370) Increase in advance deposits (2,207) - (2,207) Increase in prepaid expenses (1,890) - (1,890) Increase in inventories (304) (46) (350) Increase in accounts payable 12,496 187 12,683 Increase in other accrued liabilities 18,257 1,265 19,522 ________ ________ ________ Net cash provided by operating activities 26,091 1,323 27,414 ________ ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES: Increase in property and equipment (262,211) (111,544) (373,755) Increase in restricted cash (10,868) - (10,868) Increase in other assets (1,070) - (1,070) Increase in pre-opening expenses (14,976) (786) (15,762) (Decrease) increase in construction payables (2,365) 14,990 12,625 ________ _______ ________ Net cash used in investing activities (291,490) (97,340) (388,830) ________ ________ ________
The accompanying notes are an integral part of these financial statements. 51 NEW YORK-NEW YORK HOTEL & CASINO, LLC (A Development Stage Company) STATEMENTS OF CASH FLOWS (in Thousands)
For the Period From Inception (December 23, For the twelve months 1994) ended December 31, through _________________________________ December 31, 1996 1995 1996 ________ ________ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt $225,999 $ 59,001 $285,000 Increase in deferred financing fees, net - (2,480) (2,480) Members' contributions 45,000 40,000 85,000 _______ ________ ________ Net cash provided by financing activities 270,999 96,521 367,520 _______ ________ ________ Increase (decrease) in cash and cash equivalents 5,600 504 6,104 Cash and cash equivalents, beginning of period 504 - - ________ ________ ________ Cash and cash equivalents, end of period $ 6,104 $ 504 $ 6,104 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest, net of amounts capitalized $ - $ - $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Capital lease for equipment $ 1,001 $ - $ 1,001 ======== ======== ======== Retention payable included in construction in progress $ 14,596 $ 3,747 $ 18,343 ======== ======== ======== Contributed land, at fair market value $ - $ 41,200 $ 41,200 ======== ======== ======== Contributed intangible asset, at fair market value $ - $ 1,200 $ 1,200 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 52 New York-New York Hotel & Casino, LLC (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS 1. Organization and Operations MGM Grand, Inc. ("MGM"), a Delaware corporation, and PRMA Las Vegas, Inc. ("Primadonna"), a Nevada corporation, entered into an operating agreement (the "Agreement") dated December 23, 1994 (inception) to establish NEW YORK-NEW YORK Hotel & Casino, LLC, a Nevada limited liability company (the "Company"), doing business as NEW YORK-NEW YORK Hotel & Casino (the "Hotel-Casino"). The Agreement will expire on December 23, 2024. The purpose of the Company is to acquire certain unimproved property for development and operation of the Hotel- Casino which opened to the public January 3, 1997, at an approximate cost of $460,000,000. MGM contributed to the Company land with a fair market value of $41,200,000 to comprise its total initial equity investment. Primadonna contributed to the Company an intangible asset with a fair market value of $1,200,000 and cash of $40,000,000 for a total initial equity investment of $41,200,000. Each member contributed cash of $22,500,000 during fiscal year 1996. Each member has a 50% ownership interest in the Company. Profits and Losses (as defined), quarterly Net Cash Flow Payments (as defined), and additional capital contributions will be allocated to each member at their 50% ownership interest. MGM and Primadonna shall not be liable under a judgment, decree, order of any court or in any other manner, for a debt, obligation or liability of the Company, except as it relates to the Bank Credit Facility (see Note 4). Since the planned principal operations had not commenced as of December 31, 1996, the Company has accounted for its operations as a development stage company. There were no operations, nor members' equity contributions during the period from inception (December 23, 1994) through December 31, 1994. Comparative and cumulative information for 1994 is therefore not presented. 2. Summary of Significant Accounting Policies a. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. b. Cash and Cash Equivalents Cash and cash equivalents include all cash balances and highly liquid investments with original maturates of three months or less. c. Restricted Cash Restricted cash represents amounts withdrawn against the Company's Bank Credit Facility (as defined herein), which are restricted for payment of certain construction payables. 53 d. Inventories Inventories, which consist primarily of beverage and gift shop merchandise, are stated at the lower of cost, determined on a first-in, first-out basis, or market value. e. Property and Equipment Property and equipment are stated at cost. No depreciation has been charged to expense in the current year as the property had not yet opened to the public, and no assets had yet been placed in service. f. Capitalized Interest The Company capitalizes interest costs associated with debt incurred during the active construction and development phases of its facilities and other major projects. Interest costs capitalized to construction in progress for the year ended December 31, 1996 and 1995 were $13,951,000 and $759,000, respectively. g. Pre-opening Expenses Pre-opening expenses include direct incremental project salaries and other pre- opening expenses incurred during the pre-opening phase of the project. All pre- opening costs directly related to gaming and hotel operations are capitalized as incurred and charged to expense in the period the project is ready for its intended use. All pre-opening costs were expensed in the period ending December 31, 1996, as the property was ready for use as of December 25, 1996. h. Income Taxes The Company is not subject to income taxes, therefore no provision for income taxes has been made as the members include their respective shares of the Company's income or loss in their income tax returns. I. Valuation of Land The land contributed by MGM has been included in property and equipment at a value of $41,200,000 (see Note 1). This amount exceeds MGM's original cost basis and represents the valuation which has been agreed upon by the members. j. Fair Value of Financial Instruments The fair value of the Company's financial instruments approximates their recorded value at December 31, 1996 and 1995. k. Reclassifications Certain reclassifications have been made to prior year amounts to conform to current year presentation. 54 3. Other Assets Other assets at December 31, 1996 and 1995 consist of the following:
1996 1995 _______ ________ (in thousands) Deferred financing fees $ 2,994 $ 2,675 Intangible asset 1,319 1,200 Organization costs 461 - Chips and tokens 513 - ________ ________ Subtotal 5,287 3,875 Less: amortization (537) (195) ________ ________ Other assets, net $ 4,750 $ 3,680 ======== ========
Deferred financing fees and costs related to obtaining the Company's long-term debt facility were capitalized, and are being amortized to interest expense on a straight-line basis over the period of the loan. In accordance with the Company's capitalization of interest costs during the development phase, the amortized portion of these fees was included in capitalized interest. Intangible asset represents certain rights related to the "New York Theme," contributed by Primadonna, in accordance with the Agreement. Upon opening the Hotel-Casino, this amount will be amortized over the life of the Agreement (30 years). Organization costs consist primarily of professional and legal fees incurred to establish the Company, and obtain requisite Gaming Licenses. Upon opening the Hotel-Casino, these costs will be amortized over 5 years. Chips and tokens consist of the cost of purchasing the gaming chips and tokens used in the Hotel-Casino. Upon opening the Hotel-Casino, these costs will be amortized over 3 years. 55 4. Long-Term Debt Long-term debt consists of the following:
December 31, 1996 1995 ________ ________ (in thousands) Amount due under Bank Credit Facility at floating interest rates based on Libor plus between .75% to 2.00% depending on the Guarantor Funded Debt Ratio as defined. Interest on the Bank Credit Facility ranged from 6.25% to 8.75% during 1996, maturing March 31, 2002. $285,000 $ 59,001 Less-current portion of long-term debt - - ________ ________ Total long-term debt $285,000 $ 59,001 ======== ========
On September 15, 1995, the Company entered into a secured limited recourse financing agreement for a $225,000,000 Construction/Revolving Loan (the "Bank Credit Facility") with a consortium of banks, led by Bank of America. On September 26, 1996, the Bank Credit Facility was amended to increase the Commitment to $285,000,000. The Bank Credit Facility was a non-revolving construction line of credit, which converted to a 5 year reducing revolver upon the commencement of operations of New York New York on January 3, 1997. Interest on the Bank Credit Facility is variable based on a formula defined in the Bank Credit Facility agreement. An initial payment of $20,000,000 is due on the Initial Reduction Date (as defined, which is March 31, 1998). Thereafter, quarterly installments are due of $9,375,000 for the next four quarters; $11,250,000 for the next eight quarters; $12,500,000 for the next three quarters; and the balance maturing four years after the Initial Reduction Date. Additional principal payments are due one year after operations commence based on 50% of Available Cash Flow (as defined). The Company incurred commitment fees on a quarterly basis on the unused portion of the Bank Credit Facility (as defined) at .5%. Commitment fees incurred during the years ended December 31, 1996 and 1995 were $284,000 and $228,000, respectively; these amounts are included in capitalized interest. Substantially all property and equipment of the Hotel-Casino is pledged as collateral under the Bank Credit Facility. The Bank Credit Facility contains various restrictive covenants including the maintenance of certain financial ratios and limitations of additional debt, distributions, disposition of property, mergers and similar transactions. Compliance with these covenants is not required until the Hotel-Casino commences operations. As a condition to the Bank Credit facility, MGM and Primadonna (collectively, the "Guarantors") guaranteed completion of the Hotel-Casino and, in addition, entered into a "Keep Well" agreement whereby, if the Company fails to be in compliance with any of the financial ratio covenants (as defined), the Guarantors shall contribute Acceptable Cash Equity (as defined) to the Company. 56 The Bank Credit Facility allows for the issuance of letters of credit of up to $20,000,000 and the issuance of swing line loans of up to $10,000,000. As of December 31, 1996, the Company has not issued any letters of credit nor received advances on the swing line loans. Interest payable at December 31, 1996 and 1995 was approximately $2,158,000 and $175,000 respectively, and is included in other accrued liabilities in the accompanying balance sheets. Scheduled maturities of long-term debt are as follows as of December 31, 1996:
(in thousands) 1997 $ - 1998 48,125 1999 43,125 2000 45,000 2001 48,750 Thereafter 100,000 ________ $285,000 ========
5. Capital Lease In December, 1996, the Company entered into a five-year master equipment lease agreement to purchase various powered supply carts with a fair market value of $1,001,000 at an interest rate of 7.46%. The future minimum lease payments by year under the lease, together with the present value of the minimum lease payments, consisted of the following at December 31, (in thousands):
1997 $ 240 1998 240 199 240 2000 240 2001 241 _______ Minimum lease payments 1,201 Less: amounts representing interest 200 _______ Present value of minimum lease payments $1,001 =======
6. Abandonment Loss The Company incurred costs related to the construction of flyover ramps to divert traffic from the heavily traveled intersection in front of the Hotel- Casino. Based upon the results of the traffic studies subsequently performed, management changed their intentions and abandoned construction of these flyovers; therefore $642,000 of abandonment loss, the cumulative costs incurred to date, was charged to expense as of December 31, 1995. 57 7. Related Party Transactions During the year ended December 31, 1996 and 1995, the Company engaged in certain transactions with MGM and Primadonna. In 1995 MGM and Primadonna, each, contributed $5,000,000, respectively to the Company, which amounts were advanced to, and subsequently repaid by the Company, during the year ended December 31, 1995. In addition, the Company has reimbursed expenses related to construction and pre-opening expenses paid for by MGM and Primadonna. These reimbursed expenses approximated $96,000 and $1,544,000 for 1996 and $414,000 and $2,279,000 for 1995, for MGM and Primadonna, respectively. Included in these amounts is interest paid of $0 and $4,000 to MGM and Primadonna, respectively for 1996, and $44,000 and $40,000 to MGM and Primadonna, respectively for 1995. The Company leased approximately 5,800 square feet of office space from MGM. The annual lease expense was approximately $55,500 for the years ended December 31, 1996 and 1995. 8. Commitments and Contingencies Litigation The Company is party to various litigation arising in the normal course of business. Management is of the opinion that the ultimate resolution of these matters will not have a material effect on the financial position or the results of operations of the Company. The Company has been named as a defendant in a trademark infringement and unfair competition action. The action alleges that the plaintiff owns the trademark rights for a stylized design mark featuring an apple surrounded by the words, "New York New York" for restaurant services. Prior to filing the complaint the plaintiff offered to sell the trademark to the Company for at least one million dollars; the Company declined such purchase. The litigation is currently in the early stages of development, and, in the opinion of management, the ultimate outcome of this matter is not presently known. The Company has retained outside counsel who have indicated that there is very little likelihood of a damage award being rendered against the Company, even if the Court concluded that the trademark infringement had occurred. However, the Company could be required to either obtain a trademark license, or negotiate a purchase from the plaintiff. 9. Subsequent Events The Hotel-Casino opened to the public on January 3, 1997. On January 15, 1997, the Company signed a letter of intent to purchase improved real property located at 3782 Las Vegas Boulevard South, from LaQuinta Inns, Inc. The purchase price is expected to be $13,500,000, and the transaction is contemplated to close on or before March 14, 1997. 58 On January 21, 1997, the Company entered into a $20,000,000 Master Security Agreement for equipment financing with a financial institution (the "Note"). The Note is payable in 58 monthly installments of $254,000 and one final installment of $5,000,000. The Note contains a Contract Rate of interest equal to the sum of 1) one and 88/100 percent (1.88%) per annum, plus 2) a variable per annum interest rate which shall be equal to the one month LIBOR rate. The Company has the option to convert to a fixed rate, based on the Treasury Rate, for the remaining length of time on the Note, plus one and 88/100 percent (1.88%) per annum. 59 EX-99 4 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions The information required by Items 10, 11, 12, and 13 is incorporated by reference from the 1996 Proxy Statement to be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this report. Page 60 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Financial Statements: Reference is made to the Index to Financial Statements and Related Information under Item 8 in Part II hereof where these documents are listed. (a)(2) Financial Statement Schedules: None. (a)(3) Exhibits 3.1 Amended and Restated Articles of Incorporation of Primadonna Resorts, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 No. 33-61212 filed by the Registrant). 3.2 Bylaws of Primadonna Resorts, Inc., dated April 12, 1993 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 No. 33-61212 filed by the Registrant). 10.1 Primadonna Resorts, Inc. 1993 Eligible Directors' Stock Option Plan (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 No. 33-70842 filed by the Registrant). 10.2 Form of Eligible Director Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 No. 33-70842 filed by the Registrant). 10.3 Primadonna Resorts, Inc. 1993 Stock Incentive Plan (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). 10.4 Form of Employee Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). 10.5 Form of Employee Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). 10.6 Form of Consultant Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). 10.7 Form of Special Employee Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). Page 61 10.8 Form of Special Employee Incentive Stock Option Award Agreement (Early Vesting Provisions) (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-8 No. 33-70844 filed by the Registrant). 10.9 Closing Agreement on Final Determination Covering Specific Matters dated July 1, 1992 between the Primadonna Corporation d.b.a. Primadonna Resort & Casino and the Internal Revenue Service (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 No. 33-61212 filed by the Registrant). 10.10 Agreement dated May 19, 1993 between RP Racing Enterprises, Inc. and The Primadonna Corporation (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 No. 33-61212 filed by the Registrant). 10.11 Amended and Restated Ground Lease Agreement dated July 1, 1993 between Primm South Real Estate Company and The Primadonna Corporation (incorporated by reference to Exhibit 1 to the Form 10-Q for the quarter ended September 30, 1993). 10.12 Aircraft Co-Ownership Agreement by and among Gary E. Primm, as Trustee of the Gary E. Primm Family Trust, and Primadonna Resorts, Inc. dated as of September 7, 1993 (incorporated by reference to Exhibit 10.12 to the Form 10-K for the year ended December 31, 1993). 10.13 Reducing Revolving Credit Agreement by and among The Primadonna Corporation, Primadonna Resorts, Inc. First Interstate Bank of Nevada, N.A., Bank of America NT&SA, Bank of America Nevada, Midlantic National Bank, First Security Bank of Utah, N.A., and Michigan National Bank dated December 28, 1993 (incorporated by reference to Exhibit 10.13 to the Form 10-K for the year ended December 31, 1993). 10.14 Employment Agreement by and among Gary E. Primm and The Primadonna Corporation dated as of October 1, 1993 (incorporated by reference to Exhibit 10.14 to the Form 10-K for the year ended December 31, 1993). 10.15 Consulting Agreement between Mr. Robert E. Armstrong and The Primadonna Corporation dated November 23, 1993 (incorporated by reference to Exhibit 10.15 to the Form 10-K for the year ended December 31, 1993). 10.16 Employment Agreement by and among William Paulos and Primadonna Resorts, Inc. dated January 9, 1994 (sic) (incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended December 31, 1994). 10.17 Operating Agreement by and between MGM Grand, Inc. ("MGM") and PRMA Las Vegas, Inc. ("PRMA-LV") dated as of December 26, 1994 (incorporated by reference to Exhibit 10.17 to the Form 10-K for the year ended December 31, 1994). 10.18 Contribution Agreement with Joint Escrow Instructions by and among PRMA- LV, MGM and New York-New York Hotel, LLC dated as of December 26, 1994 (incorporated by reference to Exhibit 10.18 to the Form 10-K for the year ended December 31, 1994). Page 62 10.19 Split-Dollar Agreement among Gary Primm, Primadonna Corporation and Robert E. Armstrong, Trustee of the 1992 Primm Children's Trust U/A dated December 22, 1992 (the ("Trustee") dated January 19, 1994 (Split- Dollar Agreement I") (incorporated by reference to Exhibit 10.19 to the Form 10-K for the year ended December 31, 1994). 10.20 Amendment to Split-Dollar Agreement I among Gary Primm, the Primadonna Corporation and the Trustee dated June 16, 1994 (incorporated by reference to Exhibit 10.20 to the Form 10-K for the year ended December 31, 1994). 10.21 Second Amendment to Split-Dollar Agreement I among Gary Primm, the Primadonna Corporation and the Trustee dated December 15, 1994 (incorporated by reference to Exhibit 10.21 to the Form 10-K for the year ended December 31, 1994). 10.22 Split-Dollar Agreement among Gary Primm, The Primadonna Corporation and the Trustee dated January 19, 1994 ("Split-Dollar Agreement II") (incorporated by reference to Exhibit 10.22 to the Form 10-K for the year ended December 31, 1994). 10.23 First Amendment to Split-Dollar Agreement II among Gary Primm, the Primadonna Corporation and the Trustee dated December 15, 1994 (incorporated by reference to Exhibit 10.23 to the Form 10-K for the year ended December 31, 1994). 10.24 Split-Dollar Agreement among Gary Primm, The Primadonna Corporation and the Trustee dated February 14, 1994 ("Split-Dollar Agreement III") (incorporated by reference to Exhibit 10.24 to the Form 10-K for the year ended December 31, 1994). 10.25 First Amendment to Split-Dollar Agreement III among Gary Primm, the Primadonna Corporation and the Trustee dated December 15, 1994 (incorporated by reference to Exhibit 10.25 to the Form 10-K for the year ended December 31, 1994). 10.26 Amended and Restated Reducing Revolving Credit Agreement dated July 17, 1995 by and among Primadonna Resorts, Inc., The Primadonna Corporation, and PRMA Land Development Company, as "Borrowers", and First Interstate Bank of Nevada, N.A. as "Agent Bank" for a consortium of seventeen participating bank listed therein as "Lenders". (incorporated by reference to Exhibit 10.26 to the Form 10-Q for the quarter ended June 30, 1995). 10.27 First Amendment to Amended and Restated Reducing Revolving Credit Agreement, dated march 27, 1996 by and among Primadonna Resorts, Inc., The Primadonna Corporation, and PRMA Land Development Company as "Borrowers", and First Interstate Bank, N.A. as "Agent Bank" for a consortium of seventeen participating banks listed therein as "Lenders" (incorporated by reference to Exhibit 10.27 to the Form 10-Q for the quarter ended March 31, 1996). 10.28 Consulting Agreement between Robert E. Armstrong and The Primadonna Corporation dated September 1, 1996 (incorporated by reference to Ex- hibit 10.28 to the Form 10-Q for the quarter ended September 30, 1996). Page 63 21 Subsidiaries 23 Consent of Independent Public Accounts 24 Power of Attorney (See page 53 hereof) (b) Reports on Form 8-K No report on Form 8-K was filed during the three-month period ended December 31, 1996. 27 Financial Data Schedule Page 64 POWER OF ATTORNEY SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27th, day of March 1997. Primadonna Resorts, Inc. By: /s/ Gary E. Primm _____________________ Gary E. Primm Chairman of the Board, Chief Executive Officer and Director Each person whose signature appears below hereby authorizes Gary E. Primm, as attorney-in-fact to sign on his behalf, individually, and in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date _________ _____ ____ /s/Gary E. Primm Chairman of the Board, Chief March 27, 1997 ______________________ Executive Officer and Director Gary E. Primm /s/Craig F. Sullivan Chief Financial Officer and March 27, 1997 ______________________ Treasurer ( Principal Financial Officer) Craig F. Sullivan /s/Michael P. Shaunnessy Vice President - Finance March 27, 1997 ______________________ (Principal Accounting Officer) Michael P. Shaunnessy /s/Robert E. Armstrong Secretary and Director March 27, 1997 ______________________ Robert E. Armstrong /s/Madison B. Graves II Director March 27, 1997 ______________________ Madison B. Graves II /s/H. Martin Rosa Director March 27, 1997 ______________________ H. Martin Rosa /s/Sigmund Rogich Director March 27, 1997 ______________________ Sigmund Rogich /s/George C. Swarts Director March 27, 1997 ______________________ George C. Swarts Page 65 Primadonna Resorts, Inc. and Subsidiaries Exhibit Index Sequentially Exhibit Numbered No. Description Page _______ _______________________________ ____________ 21 Subsidiaries 67 23 Consent of Independent Public Accountants 68 24 Power of Attorney ( see page 65 hereof) 27 Financial Data Schedule 69 Page 66 Exhibit 21 Primadonna Resorts, Inc. and Subsidiaries The Primadonna Corporation, a Nevada corporation PRMA Land Development Company, a Nevada corporation PRMA Las Vegas, Inc., a Nevada corporation Page 67 Consent of Independent Accountants As independent public accountants, we hereby consent to incorporation of our report dated January 29, 1997 included in this Annual Report on Form 10-K, into Primadonna Resorts, Inc. and Subsidiaries previously filed Registration Statements on Form S-8 (File No. 33-70842) and Form S-8 (File No. 33-70844). /s/Arthur Andersen LLP ____________________ Arthur Andersen LLP Las Vegas, Nevada March 27, 1997 Page 68 EX-27 5
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL FORM 10-K AS OF DECEMBER 31, 1996, CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1996 DEC-31-1996 10027 0 1170 0 2713 19921 417098 116183 399971 17383 168200 0 0 308 214003 399971 249013 234935 112504 203923 0 0 4923 26089 9321 16768 0 0 0 16768 .55 .55
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